Queensland businesses could be losing over $12 billion per annum as a result of company fraud according to a recent study by the Association of Certified Fraud Examiners (ACFE) – and small businesses are most at risk.
”Fraud is not just a problem for big business,” said Professor Keitha Dunstan who heads the School of Business at Bond University.
“Among the most concerning findings of the ACFE report is that smaller organisations are victimised by fraud more often than larger organisations and that they suffer a disproportionately large median loss.”
Other key findings of the ACFE’s Report to the Nations indicate that:
- Across the board, an estimated 5% of business revenues is lost to fraud each year;
- More than three-quarters of frauds are committed by employees working in accounting, operations, sales, customer service and purchasing departments or in executive/upper management;
- The most commonly victimised industries are banking and financial services, government and public administration, and manufacturing;
- The smallest organisations suffer the largest median losses.
“Major frauds, such as the $16 million allegedly embezzled from Queensland Health last year, tend to make the headlines, but small and medium-sized companies are significantly impacted by losses of far lesser amounts because they represent a much higher percentage of turnover,” said Professor Dunstan.
“The problem arises because smaller businesses tend not to have the necessary controls and checks in place to prevent fraud in the first instance.
“In companies or departments with a small tight-knit team, employees develop trust and close relationships so they wouldn’t suspect that their workmates might be secretly carrying out fraudulent activities.
“In family businesses, it’s even less likely that a family member would be suspected of fraud – and yet, just recently, there has been the case of a woman in NSW siphoning off $1 million from trust accounts held by her family’s real estate business to support her gambling addiction.”
In conjunction with International Fraud Awareness Week, Bond’s School of Business will hold a special Masterclass focusing on small business fraud on Wednesday, 28 November.
This free event is open to the public and will include a panel discussion featuring three finance sector experts who will share their best advice for preventing fraud in the workplace.
“It’s most definitely a case of prevention being better than cure when it comes to fraud,” said Professor Dunstan.
“According to a corporate fraud report by KPMG, less than 10% of the money lost is recovered and in more than 60% of cases there is absolutely no recovery.
“The ACFE study also indicated that, on average, it takes companies 18 months to discover that a fraud is occurring, by which time the perpetrator may have embezzled a substantial amount of money that you are unlikely to be able to recover.”
Contact Vesna Bragagnolo at Bond University’s School of Business on 07-5595 2268 or email firstname.lastname@example.org.